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    Updated On 20-09-2017
 
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Norway

Residency
All persons domiciled or permanently resident in Norway are subject to Norwegian income tax on their worldwide income, although certain exemptions apply for foreign oil-industry workers. A person becomes permanently resident in Norway if present in Norway for a period exceeding 183 days during any 12-month period or if the stay exceeds 270 days during any 36-month period. Individuals do not become resident during the first calendar year if the stay in Norway that year is less than 183 days.

Non-residents are taxed on income received from real and personal property in Norway and on directors' fees from Norwegian corporations. In addition, income from personal services carried out through private or public employment in Norway by nonresidents temporarily present in Norway, including persons sent to Norway by employment agencies, are taxable. However, an applicable tax treaty can limit Norway's right to tax.

Taxable income and rates
Individuals pay national and municipal taxes. The rates and brackets are adjusted annually by the Norwegian parliament.

A combined municipal and national tax of 28% applies on net income, except in Finnmark and Nord-Troms, where the combined rate is 24.5%. (Except for Finnmark and Nord-Troms, the national tax rate is 11.8% and the municipal tax rate the remainder.) To encourage residence in Finnmark and Nord-Troms, taxpayers in these areas are entitled to special deductions of NOK 15,000 for single taxpayers and NOK 30,000 for married taxpayers filing joint tax returns.

A marginal national tax (often referred to as a "top tax") of 9% (7% for Finnmark and Nord¬Troms) applies on the portion of personal income between NOK 420,000 and NOK 682,500 for all taxpayers. A 12% marginal tax applies on the portion of personal income exceeding NOK 682,500 for all taxpayers.

Personal income comprises gross income from employment, compensation for work performed by partners in partnerships and an adjusted net profit earned by self-employed individuals.

The employee contribution to Norwegian social security is 7.8% of personal gross income and 11 % of self-employment income, as well as compensation earned by partners in partnerships, except in farming, forestry and fishing, where it is 7.8%. (Pension and medical insurance are included in the social security tax.)

Determination of taxable income
Income tax is based on worldwide income, net of expenses (including interest paid) and foreign income taxes. Taxable income includes the following: salaries; dividends, interest and royalties; income from real property and other capital; industrial, commercial and agricultural profits; and shares of partnership net income, whether or not paid out. Gains on the sale of real property used as a permanent residence are taxable where the taxpayer owned the property for less than one year (or five years for a leisure residence).

Gains from the sale of securities are included in taxable income. Quoted shares are valued at 85% of the market value. Shares in unquoted companies are valued at 85% of the assumed fair market value or 85% of the company's net tax value. Losses incurred on the sale of securities may be fully deducted from taxable income. Dividends are taxed as ordinary income (with some minor adjustments).

A standard minimum deduction from ordinary income is available for incidental personal expenses of up to 36% of salary, to a minimum of NOK 4,000 and a maximum of NOK 67,000. The standard personal deductions are NOK 38,850 for single taxpayers and NOK 77,700 for married taxpayers filing jointly. Married taxpayers may choose to file jointly or separately to minimise their tax burden. A resident taxpayer is entitled to an unlimited deduction for interest paid on debts.

For individuals becoming or ceasing to be residents during a year, the standard deductions and the tax brackets for national tax levied on personal income are, as a rule, reduced proportionally.

A resident taxpayer is entitled to a deduction for supporting children who are younger than age 12 at year-end. The deduction is granted only for documented expenses, up to a maximum of NOK 25,000 for one child and a maximum of NOK 15,000 for each additional child. These limits are the same for married and single taxpayers.

There is also a special deduction for resident persons younger than age 34, who are saving to buy homes, which reduces taxes by 20%, with a maximum annual deduction of NOK 15,000 for unmarried and married taxpayers. In total, NOK 100,000 can be deducted.

Contributions to individual pension plans may be deducted up to a maximum of NOK 15,000 for both single and married taxpayers.

All financial instruments, including convertible bonds and equity options received by employees as perquisites, are subject to tax.

Special expatriate tax regime
Expatriates are entitled to choose a 10% deduction of gross remuneration with an upper limit of NOK 40,000 per annum. The deduction is available only in the first two tax assessments for individuals who are considered resident according to domestic law. There is no such limitation for expatriates who are non-residents.

The standard deduction replaces certain itemized deductions.

An EEA resident individual with limited tax liability in Norway can choose to claim deductions as if the individual was resident in Norway during the entire year under the assumption that a substantial part (i.e. 90%) of the individual's income from employment is taxable in Norway. Interest on loans is deductible only in respect of investments subject to Norwegian tax (e.g. a house purchased in Norway). Nonresidents in other countries who are liable to Norwegian tax on Norwegian-source income may only claim a deduction for costs that relate to Norwegian¬source income taxable in Norway (in practice, the standard deductions will be the only deductions available.)

Capital taxes
Individuals are subject to wealth tax on capital, which is payable to the state (at progressive rates) and the municipality (at a flat rate). The municipal wealth tax is 0% up to NOK 350,000 and 0.7% on the excess; the national wealth tax is 0.2% of the amount between NOK 350,000 and NOK 540,000, and 0.4% on the amount exceeding NOK 540,000.

 

Source: Deloitte

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